The trend for the second quarter 2021 in Central Wisconsin is one of continued recovery and cautious optimism. The labor market has improved significantly over the past year, though there are growing concerns of labor shortages. Fewer companies are reporting income loss, but more are concerned about rising prices. Consumers have benefited from two rounds direct stimulus with the expanded Child Care Tax Credit payments hitting on the verge of back-to-school shopping. But concerns about inflation and continued product shortages are squeezing pocketbooks.
There is some disagreement as to which of these trends are persistent and which others are simply signs of recovery. We know that demand for automobiles is high, but also know that new production has slowed due to semiconductor shortages. Similarly, companies continue to report shipping delays. These will resolve over time, though no one is certain as to when.
The pace of economic recovery also continues to accelerate as the Bureau of Economic Analysis announced a preliminary estimate of 6.5 percent GDP growth in the second quarter. This is below analysts’ expectations of as much as eight percent annualized growth and has tempered inflation discussions. Still, we know that there is both slack capacity in the market and more room to grow. It is likely that the third quarter will bring another round of federal fiscal spending, adding fuel to the economic engine.
The indicators presented below demonstrate where we are seeing signs of recovery in Central Wisconsin as well as areas where familiar problems persist.
Annualized Employment Growth
January 2016 - June 2021
Source: Current Employment Statistics, U.S. Bureau of Labor Statistics, July 2021
- Industry employment contracted by 14.5% annually in April 2020 before rebounding over recent months. Employment growth has accelerated to narrow the gap, but the total employment remains slightly behind 2019 rates in aggregate but lags significantly behind industries such as hospitality and food service that were hardest hit by the pandemic.
- Employment growth has accelerated in recent months as hiring rates have returned almost universally. The demand for labor outstrips supply in many sectors as workers are more likely to shift roles or industries in the current market.
- Initial claims for unemployment insurance have also steadily decreased and stayed low nationally. The return of in-person education will reduce childcare demands in the fall and spur further re-entry into the labor market.
Monthly Unemployment Rate
January 2010 - June 2021
Source: Local Area Unemployment Statistics, U.S. Bureau of Labor Statistics, June 2021
- Unemployment rates have decreased precipitously over the past five months after spiking at 13.8 percent in April 2020. The current rate of 4.1 percent remains above March 2020 but is more reflective of current hiring conditions.
- The regional unemployment trend has followed state and national patterns throughout the course of the pandemic and has dipped below both state and national rates through the end of 2020.
- Recent unemployment rates resumed recent seasonal norms. This is both a function of increased economic activity and the continued impact of labor force constraints.
- Near-term forecasts suggest that the unemployment situation will remain relatively stable but will not fully recover until 2022. Some lingering uncertainty remains regarding increasing wage pressures and the unknown net effects of the delta variant of COVID-19.
Total Unfilled Job Vacancies
January 2016 - June 2021
Source: Total Unfilled Vacancies, OECD, June 2021
- Unfilled vacancies have reached a national all-time high with more than 9.2 million positions open nationally.
- Hiring is expected to remain steady through the year as more customer-facing industries continue to attempt to staff to pre-pandemic levels and other large industry sectors, including construction and manufacturing continue to add capacity to fuel growth.
Weekly Economic Index
January 2020 - June 2021
Source: Lewis-Mertens Stock Weekly Economic Index, Federal Reserve Bank of St. Louis, June 2021.
- Index collects all economic indicators produced weekly.
- Recent observations show the inflection and depth of crisis impacts, with the economy contracting at more than 10 percent per week through May 2020 before beginning a sustained recovery.
- The rate of recovery spiked in early March due to the optimism of the American Recovery Plan Act and associated stimulus spending.
- NBER's recent announcement of the conclusion of the most recent recession and recent volatility in equities markets has introduced some volatility in the past month.
New Housing Starts
June 2021 YTD Annualized Change
Source: U.S. Census Bureau, June 2021
- New housing starts and total valuation increased significantly regionally and statewide over the year spurred by low interest rates and significant available credit. New housing starts locally are triple that of last year.
- The disruption of COVID-19 has delayed most construction activity, suggesting that this trend will continue for the foreseeable future as demand outstrips capacity and material pricing continues to be inflated.
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